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HT for Small Biz - Newsletter

Sham Contracting - Building Company found guilty

The Fair Work Commission will be issuing civil penalties against a building company and its director after dismissing an employee for the purposes of re employing the worker as a subcontractor.

The excavating employee had been notified that the company was “happy with her work and her eagerness to learn”. She had been notified of her impending dismissal and that she would be re-employed on a subcontractor basis only.

The FWC dismissed the evidence provided by the building company that the excavator operator was dismissed because there wasn’t enough work for her and she had allegedly refused to undertake laboring duties during down times.

“There was excavating work to be done, and evidence suggests that the employee was a good excavator”. Further findings revealed that the building company had contravened the NES by failing to provide the employee with consultation relating to the proposed changes and not paying the employee the required period of notice.

The building company’s letter to the employee detailed the specified rates of pay under the new arrangement and that it was to be “an ABN or nothing”.

“The threat of dismissal was made in conjunction with a proposal that she become an independent contractor” Judge Simpson said. “The fact that the company had claimed it was happy with the employee’s performance prompts me to ignore evidence that the decision to dismiss the employee had a lack of performance motive rather than simply wishing to change her arrangements.

Altering an employee’s arrangements when their position suffers as a result of a downturn in sales or activity during a period is legal. The fact that the building company failed to comply with statutory requirements of providing consultation and payments in lieu of the notice period has placed the company in a position of liability.

The nature of the situation also suggests that the employee’s position was being performed well. Termination due to the downturn in activity was therefore incorrect way of handling the arrangement. A consultation with the employee to discuss the effects the downturn in sales/activity has had on the position, followed by a transfer to lower paid duties or even redundancy termination is the correct process. Following all procedural fairness and adhering to legislation such as applying relevant redundancy payments and period of notice entitlements needs to occur, which would then allow for the employee to be lawfully re-employed/transferred to a subcontractor arrangement.

If you have any queries regarding transferring employees to lower paid duties, reviewing your companies contracting arrangements or lawful redundancy, please feel free to contact us on (02) 882 9694.

 Suite 4.05, 5 Celebration Drive
 Bella Vista NSW 2153

Ph: 02 8882 9694 M: 0415 225 920 

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